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TRAD-X, the industry’s first dealer-to-client (D2C) pure electronic central limit order book (CLOB) completed several live transactions in euro interest rate swaps between dealers and non-dealers. We spoke to Danny Chart, Head of OTC Product & Clearing Business Development at Eurex Clearing, about the implications for the market.
TRAD-X announced today that they have seen the first transactions in their D2C order book. What makes it so extraordinary?
It is a real innovation. Historically, central limit order books (CLOB) have been dealer-to-dealer platforms, whereas clients typically use request for quotes (RfQ) for electronic execution. To increase price and trade transparency for the buy side, TRAD-X has now developed an order book allowing clients to access Eurex Clearing OTC IRD liquidity with the flexibility of CLOB protocols. The key difference between execution protocols is RfQ relies on price discovery, while CLOB combines size and firm executable prices.
How does this affect the overall market and what does this mean for Eurex Clearing?
The D2C CLOB enhances price distribution for Market Makers, connecting them to a broader client base which is perhaps not normally accessible on a bilateral basis. This innovative platform provides our buy-side clients with access to a viable alternative liquidity pool – further increasing execution protocol options, distribution of price discovery and depth of market – as well as facilitating Eurex Clearing AG continued development of an EU-based alternative for Euro OTC Clearing.
Do you see other innovations on the horizon?
As the regulatory landscape continues to evolve, we expect further innovation in the development of new electronic liquidity pools and functionality. For example, recently we have seen Tradeweb automate the workflow to execute/clear both legs (OTC/ETD) of an EFS (Exchange for Swap) trade at Eurex Clearing. This functionality has been available for dealers since December 2019 and will be extended to end clients in Q2 2020.